B+

New Fed minutes reveal powerful CEO voted to make William Dudley president of FRBNY and grant him conflicts waivers for investments in CEO's own company.

In the fall of 1996, John Cassidy arranged to interview Paul Samuelson in his office at M.I.T. for an article he was writing on the state of economics. He began by asking Samuelson whether he was still a Keynesian: "I call myself a post-Keynesian," Samuelson replied. "The 1936 Model A Keynesianism is passé..." He recalled attending an event that was held in Cambridge, England, in 1986 to mark the one-hundred-and-fiftieth anniversary of Keynes's birth. "Everybody was there. And they all stood up and said, 'I am still a faithful Keynesian. I am still a true believer.' I was a bit rude. I said, 'You remind me of a bunch of Nazis saying, I’m still a good Nazi.' It’s not a theology: it’s a mode of analysis. I think I am a different Keynesian than I was ten years ago."

These two charts suggest a major decline is ahead in 2013; but we are told "Don't fight the Fed," blah blah blah. Really? What did the market do after QE3 and QE4 were duly announced? It tanked. What if the Fed is out of tricks? It's not really a question; Fed Chairman Ben Bernanke said as much in his press conference. It's not clear if the Ibogaine was wearing off or just kicking in, but the Chairman had an apologetic deer-in-the-headlights look of, "Gee, we're out of tricks and I'm sorry to have to tell you what is painfully obvious to everyone who isn't stoned silly on Delusionol (tm)."

I attempt to craft something that has a chance of working.

A.M. Kitco Metals Roundup: Gold Drops Below $1,700 Following another Mysterious Price Drop in Asian Trading

Gold set for dramatic correction: hedge fund manager

• Bernanke Wields New Tools to Reduce Unemployment Rate (BBG)
• Home Seizures Rise as Banks Adjust to Foreclosure Flow (BBG)
• EU Backs Release Of Greek Aid (WSJ)
• Democrats Confident They Have 'Cliff' Leverage (WSJ)
• Americans Back Obama Tax-Rate Increase Tied to Entitlement Cuts (BBG)
• Goldman flexes tentacles: Treasury open to Carney radicalism (FT)
• Launch Fuels Asia Security Concerns (WSJ)
• BOJ’s Unlimited Loan Program Seen Open to Use by Hedge Funds (BBG) - there are Japanese hedge funds?
• Abe Set to Face Manufacturing Gloom as Japan Contracts (BBG)
• US and UN condemn N Korea rocket launch (Guardian)
• Eurozone agrees common bank supervisor (FT)
• Berlusconi Adds to Italy Turmoil by Signaling He’d Step Aside (BBG)

Define irony: when the most vocal supporter of a dramatic change to the existing tax policy takes advantage of the last few days of the old one...

• BERKSHIRE HAS PURCHASED 9,200 OF CLASS A SHRS AT $131,000-SHR
• BERKSHIRE RAISED PRICE LIMIT FOR BUYBACKS TO 120% BOOK VALUE
• BERKSHIRE MAY BUY ADDED SHRS AT NO MORE THAN 120% BOOK VALUE
• BERKSHIRE BOOSTS BUYBACK PRICE LIMIT TO 120% BOOK VALUE VS 110%

A total $1.2 billion spent to avoid a few hundred million in new taxes. And now back to the hypocrticy of the "Buffett tax", and "Patriotic Millionaires for America." In other news, total donations to pay down the debt in Fiscal 2013 (starting October 1): $290,195.03.

While trying to buy 500 shares of a preferred stock this morning, Principal Financial Group Inc. series B (NYSE:PFG-B), PreMarketInfo's Dennis Dick encountered the algos heads on. As he notes "It is such a challenge to trade any type of illiquid issue as the execution of orders is nearly impossible in this HFT world."  Here is the sequence of events. Some serious issues are highlighted in these few minutes of activity: 1) Inability for market participants to access a quote; 2) Excessive quote pollution as HFT algorithms battle each other; 3) Market fragmentation can lead to inferior execution; and 4) HFT penny jumping can discourage market liquidity. The bottom line is that all of these issues discourage participants from trading illiquid securities – making these securities even more illiquid.

• Fed Seen Pumping Up Assets to $4 Trillion in New Buying (BBG)
• China New Loans Trail Forecasts in Sign of Slower Growth (BBG)
• U.S. "fiscal cliff" talks picking up pace (Reuters)
• Insider-Trading Probe Widens (WSJ)
• U.K.'s Top Banker Sees Currency Risk (Hilsenrath)
• Three Arrested in Libor Probe (WSJ)
• Nine hurt as gunmen fire at Cairo protesters (Reuters)
• Egyptian President Gives Army Police Powers Ahead of Vote (BBG)
• Pax Americana ‘winding down’, says US report (FT)
• Japan Polls Show LDP, Ally Set for Big Majority (DJ)
• HSBC to pay record $1.9 billion U.S. fine in money laundering case (Reuters)

These three letters - C.A.B. - might just be the Dis-Humor story of the day. NPR reports that more than 200 schools across California are coming to the shocking realization that the upfront cash they needed so badly came at quite a price. These 'Capital Appreciation Bonds' are unlike normal bonds (requiring regular coupon payments and principal repayment); instead they provide the 'lent' money upfront and defer all interest and repayment to some magical faery land time in the future (by which time the interest accrued has grown exponentially as the interest accrues on the rising 'principal plus previously accrued interest'). Brilliant - as the Guinness chaps might say. So California schools are now undertaking PayDay or loan-shark style loans defending the idiocy of super-short-term thinking with such statements as "Why would you leave $25 million on the table?" referring to the upfront cash that one Treasurer was able to get his hands on - with clearly no comprehension of the financial instrument's massive convexity. California State Treasurer Bill Lockyer said "It's the school district equivalent of a payday loan or a balloon payment that you might obligate yourself for, so you don't pay for, maybe, 20 years - and suddenly you have a spike... It's so irresponsible."

Everyone interested in real estate is asking the same question: Is the bottom in, or is this just another "green shoots" recovery that will soon wilt? Let’s start by reviewing the fundamental forces currently affecting real estate valuations. ZIRP has created a "crowded trade" in low-risk investments with attractive yields such as corporate bonds, dividend stocks, and real estate, which is being fueled by a self-reinforcing perception that "the bottom is in." The question now is will these forces continue pushing prices higher? If these forces deteriorate or lose their effectiveness, then the “green shoots” of investor interest may wither as the U.S. economy joins Europe and Japan by re-entering recession.

... in under 140 characters no less

A consolidative tone threatening to emerging in the foreign exchange market, as prices churn awaiting not only today's press conference following the ECB meeting, but also tomorrow's US employment data and prospects for an expansion of QE3+ at next week's FOMC meeting. 

Five major central banks were to meet this week, with only the Reserve Bank of Australia poised to act.  They did cut rates, but the accompanying statement did not tip the hand of the next move.  The market took advantage of the jobs data's favorable optics to reduce the likelihood of a follow up cut in February to about 50/50.  

The details of the employment report were really weaker than it appeared.  The 13.9k increase in jobs is misleading as it was driven exclusively by part-time jobs.  Full time work actually fell 4.2k, the first decline in four months.  The unexpected decline in the unemployment rate to 5.2% from 5.4% in Sept and Oct was a function of a decline in the participation rate.  The Australian dollar has traded now (barely) on both sides of yesterday's range.  Offers in the $1.05 area continue to slow the Aussie's ascent.

There are almost as many theories about why obesity has exploded in America and the world since the 1980s as there are researchers compiling data. The rise in Body Mass Index (BMI) appears to correlate with the rise of high-fructose corn syrup (HFCS), a simple carbohydrate. Unfortunatley, obesity and well-being are not just a matter of carbs/no-carbs; the causal chain is just not that simple.